Living Costs Hinder Focus on Retirement Saving

According to results of the BlackRock Global Investor Pulse
Survey, fundamental financial worries such as the high cost of living (cited by
61%), the state of the U.S. economy (55%) and health care costs (50%) are the
top three threats that Americans see to their financial future. Only about one
in four Americans believes the U.S. economy and job market are getting better,
despite recent employment and equity gains.

The high cost of living has a particularly acute impact on
investors’ psyche in the U.S. Americans report having to allocate about 42% of
household income to expenses, compared with only 32% among respondents
worldwide. As a result, they have less left over for spending, savings and
investing—including retirement.

The survey found a sizeable majority of Americans are
counting on Social Security as a key source of retirement income, with 64%
saying that it will be “critical” to their ability to support themselves in
retirement.

“It’s clear that immediate financial needs are hindering
people’s ability to focus on longer term investment decisions and retirement
planning,” says Rob Kapito, president of BlackRock. “Focusing
primarily on the short-term is concerning for investors of all ages, and can
eventually create special risks for those closest to or newly in retirement,
who need to be well prepared to spend as much as two or three decades in
retirement.”

Illustrating
this “short-termism,” many Americans are not necessarily putting
their money in the best places to achieve their long-term goals. Just 27% of
Americans surveyed by BlackRock say they are more interested in investing in
stocks today than five years ago; 18% say they are not interested in stocks at
all. More than one-third (35%) of individuals say they do not hold and would
not consider investments outside of the U.S.

On average, cash and cash-related products take up nearly
two-thirds (63%) of Americans' total household savings and investments, and
most intend to increase their commitment to cash over the next 12 months.
"In a low return environment, such as now, cash simply does not deliver
the kind of investment performance that most investors need to reach their most
critical objectives, like retirement," Kapito says. For the remainder of
their savings and investments, Americans report holding 18% in equities, 6% in bonds,
5% in property, 2% in alternatives, and 7% “other.”

Despite the obstacles they see, many Americans are strongly
optimistic about achieving the financial goals that are most important to them.
For example, among Americans who place a high priority on saving money, 71% are
confident about achieving this goal. And, although 73% of Americans are
concerned about being able to live comfortably in retirement, nearly seven of
10 (68%) who have prioritized this goal believe they will get there.

Millennials are setting a good example for older generations
in their investing attitudes and behavior. Nearly half (45%) of Millennials say
they are more interested in stocks than they were five years ago; only 16% of
Baby Boomers are. Millennials also spend the most time reviewing or adjusting
their investments—about seven hours per month, compared with the U.S. average
of around four hours per month and the Baby Boomer average of about two hours
per month. Despite their younger age, 60% of Millennials report having started
saving for retirement—about the same as the U.S. average overall (59%).

Millennials also feel less pressure when it comes to making
room for retirement savings, with 37% saying it is "very hard" to pay
bills and save for retirement at the same time, compared with a U.S. average of
43%.

The survey also found all age groups would advise their
younger self to save earlier, save more, spend less, and pay off debt sooner.
The Silent Generation, ages 69 to 74, report the least concern about being able
to live comfortably in retirement (17% vs. 34% overall).

The
BlackRock Global Investor Pulse survey interviewed 27,500 respondents, in 20
nations, in July and August 2014.